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Should you go paperless?

Handling your financial documents electronically can save you more than paper cuts

Consumer Reports Money Adviser: September 2010

More companies are giving customers the option of receiving bills, notices, and other paperwork electronically, as well as making payments over the Internet. In addition to saving trees, going paperless can also save you money. But it's not for everyone or every situation. There are several factors to consider before trading hard copies for electronic ones.

Of course, you can go paperless for some items but stick with paper for others. You might want hard copies of certain documents, say, your tax returns, as well as electronic ones. In other cases you might not have a choice. The U.S. Treasury has proposed a rule that all benefits, including Social Security and Veterans Affairs payments, be made electronically for new enrollees beginning March 1, 2011, and for existing ones starting March 1, 2013. Electronic statements are a requirement if you want a high-interest checking account. And some companies now make annual reports and proxy materials available online automatically, requiring shareholders who want paper copies instead to request them.

What's in it for you?

Paperless billing and record-keeping offers several advantages for consumers.

Cost savings

Paying bills online eliminates the cost of postage. You often can direct a company to take the payment from your bank account the day it's due, maximizing the time your money is earning interest. Also, some companies have begun charging for paper bills. ECG Long Distance charges 2.5 cents a minute for domestic long-distance calls if you get your bill by e-mail but 3.5 cents if you want a printed statement. Other businesses offer incentives for you to go paperless. Citizens Bank and Charter One pay account holders 10 cents every time they conduct certain transactions electronically, including using their debit cards and paying bills online.

Reduced clutter

All those paper bills, notices, and statements tend to pile up, and they need to be stored somewhere. Eventually you'll have to shred many of them before you discard them. Electronic versions don't take up any space—except on your computer hard drive.

Convenience

You might be able to search and sort electronic bills and statements or import the data into financial programs, such as spreadsheet applications, for analysis. Bank statements often contain interactive features that let you find out more about a charge and reconcile your checkbook. And electronic documents are portable. If you need to, you can keep years of records in a laptop or on a thumb drive. Having your documents categorized and sorted makes things easier come tax time. And filing your tax return electronically can speed up your refund.

Environmental benefits

PayItGreen, a coalition led by an electronic-payment industry group, estimates that by eliminating paper bills, payments, and statements alone, the average household would save 6.6 pounds of paper each year, avoid the release of 171 pounds of greenhouse gases and 63 gallons of wastewater, and cut gas consumption by 4.5 gallons. The estimates take into account paper, transportation, and disposal.

Stick to paper?

As we mentioned, going paperless isn't for everyone, nor is it a good idea in some cases. Consider sticking with paper if:

Your computer isn't secure

Having all your documents in one place is convenient, but they're an easy target if a hacker or an unauthorized user in your home gets access to your machine. And electronic records aren't for you if you don't keep your security software up-to-date or use a log-in password.

You just have to print it

If you hate reading on a computer screen or for any other reason find yourself printing everything, consider sticking with hard copies from the companies you do business with for convenience. But keep in mind that Consumer Reports testing found that the cost of paper and ink to print a page of black text can be as much as 12.6 cents.

You can't manage electronic copies

Some bills and other electronic communications arrive directly in your e-mail In box. For others, you'll receive a notice that the document is ready to be viewed and downloaded. You'll have to log into your account on the company's website to get it. If either seems like too much trouble, perhaps you need the arrival of an actual envelope to get you motivated to look at whatever's being sent.

It has to be in hard copy

Even if your credit-card issuer lets you initiate a challenge to an unauthorized charge by phone or through its website, you must mail a letter about your dispute to the address your issuer provides. Otherwise you'll lose your rights under federal law.

Tips for giving up paper

Here are some steps to take for all or some of your financial documents.

Secure your computer

Back up your hard drive and keep a copy of your data in a different location from your computer in case of a fire or other calamity. Make sure your computer and backup device are secure and that you have updated antivirus and antispyware programs. You can get free data encryption software at TrueCrypt.org.

Download copies

Don't just look at statements and notices online. Download copies to your computer for safekeeping and future reference.

Develop a filing system

Keep your computer desktop and hard drive from becoming a cluttered mess by setting up a consistent system of folders and file names. For example, you might set up a folder called "My Bills" with a separate folder for each company that bills you, such as "Citibank Visa" and "Phone Company." Within those, you might have individual folders for each year. Extract attached documents from your e-mail and save them in the appropriate folder.

Record scheduled payments

If you set up online bill pay, especially if it's automatic, be sure to record the payment in your checkbook or financial software well in advance so you don't risk overdrawing your account.

Retain confirmations

Whether you're paying a bill, making a deposit, transferring cash, or anything else, save a copy of all confirmations.

Keep information current

Notify businesses if you change your e-mail address. Otherwise you might miss bills and other important documents, exposing yourself to late charges and other problems. Also watch your junk e-mail folder in case a document gets routed there by mistake.